MANILA, Philippines — The country’s inflation rate could start easing in the coming months, the National Economic and Development Authority (NEDA) said.
“Given that the first quarter of the year is usually the harvest season, the planting season for vegetables, and we don’t expect any major natural disruptions during this period, I think the market should recover and I expect that inflation will start to fall in the coming months,” NEDA Secretary Arsenio Balisacan said in an interview with ANC yesterday.
Last December, the country’s headline inflation rate hit a 14-year high of 8.1 percent from eight percent in November, driven by food price increases.
Average inflation for last year was at 5.8 percent, the same as the Development Budget Coordination Committee’s assumption for that year, but above the two to four percent target range of the Bangko Sentral ng Pilipinas (BSP).
“We do know very well that the basic sources of inflation were from food and energy, fuel in particular,” Balisacan said.
Having to deal with high inflation last year amid external headwinds like the Russian invasion of Ukraine, disruption of global trade, as well as domestic shocks including typhoons and animal diseases, the government has learned some lessons, he said.
“For example, when we knew that there were shortages already because of these typhoons and continuing animal diseases, we could have facilitated and [be] more aggressive in bringing in those imports,” he said.
Balisacan said what the government wants to achieve this time is to be able to program timely importation of essential commodities like food based on the supply and demand situation.
As the government aims for six to seven percent economic growth this year, he said there is a need to manage constraints including high inflation.
“Inflation must be under control because inflation, particularly if this is coming from food and essential commodities, will hurt the poorest sectors of our society the most,” Balisacan said.
Under the Philippine Development Plan, the government has set a 2.5 to 4.5 percent target for inflation this year.
As the inflation pressure diminishes in the coming months, Balisacan said there would be less pressure for the BSP to increase the policy rates.
To rein in inflation and stabilize the peso, the BSP raised key policy rates by a total of 350-basis points last year, bringing the benchmark interest rate to a 14-year high of 5.5 percent.
While inflation is a factor in raising policy rates, Balisacan said developments in other countries like the US would also have to be taken into consideration.
“For so long as the US will continue to tighten their monetary policy, interest rates there will increase and we may act accordingly to ensure we don’t have the negative external effects of those movements elsewhere,” he said.